The words Small Business and Startup are common terms used in the business industry. While these words are used interchangeably, it will interest you to know that there is a slight difference between them.
This you should know as a business owner so that you can tell where your business falls between the two. We took to the task to write on Building a Small Business Vs. Building a Start-Up in this piece of informative writing to help your understanding of the two terms.
Building a Small Business vs. Building a Start-Up
Startup Vs. Small Business is not alien to the business world. Before you venture into Building a Small business or a startup, it is imperative that you learn about their meaning and differences. We will first of all start by finding out what the two terms mean independently.
Small Business Definition
A small business is a privately or independently owned business either a partnership or sole proprietorship with fewer employees and that is limited in size and in revenue depending on a corporation or regular-sized business.
A startup business on the other hand is perceived as a company or project established by an entrepreneur to seek and develop a product or service for which they consider to be in demand. Startup business refers to new businesses that intend to grow and expand beyond the sole proprietor.
Also, Startup faces high uncertainty and has high rates of failure, but a minority of them does go on to be successful and influential
Startup Vs. Small Business
Having defined both terms above, you can see that there is a clear slight difference in both terms. We know that ideas birth businesses, as such it is the nature of your idea and the processes involved define whether you are on the path of a small business or startup.
With that being said, the cutting difference between the two lies in the objective, aim, or goal of the business. We know small businesses to be profit-driven with a stable long-term value, while startups on the other hand are focused on top-end revenue and growth potential meaning that a start-up is liable to survive for long years without any form of revenue.
Differences in Startup Vs. Small Business
As we continue in our discourse on Building a Small Business vs. Building a Start-Up, we deemed it necessary to clearly state the differences between both.
Below are seven differences we spot as distinguishing factors between startups and small businesses.
The first identifiable difference between startups and small businesses is the coverage. A startup normally has the desire of making a global impact and aims to be disruptive.
On the other hand, a small business is a self-content business and its boundaries are fixed. Meaning that a startup has an eye for international recognition, a small business is concerned with stability and profit-making.
As we take a steeper look at Startup Vs. For small businesses, we also observe that the source of funding is a notable distinguishing factor between both.
Despite the fact that both businesses begin with funding, a Startup begins as self-funding or support from family but in the long run, it receives extra funding from Angel investors, Venture capitalists, and an initial public offering (IPO).
Small Business on the other hand gets funding from self-savings, friends and family, or a bank loan.
Taking us further as we continue to unveil the differences between startups and small businesses, we identify risk to be another distinguishing factor having observed that both businesses are prone to risk. However, Startups have a higher risk than small businesses.
The reason is that startups are liable to fail and collapse faster than small businesses. This goes to the fact that startups are trying to introduce something new in the market while small business operates a business model that is not new in the market.
The status of both businesses comes to mind when putting Startup Vs. Small Business. Startups’ status is momentary and it varies as it may either succeed and enlarge or fail and collapse. But small businesses sustain their small status for a very long time.
5. Exit strategy
Another distinguishing factor that comes to mind is the exit strategies whereby Startups have an exit strategy either it is acquired or enrolls for an IPO.
Also, startups may cease to be inexistent as an independent entity via a merger or business acquisition which is perceived as a necessary move to sustain seemingly infinite growth.
While that is not the case for Small businesses that like to be independent because relinquishing control would defeat the aim of running their own business.
As we continue to dig into Startup Vs. Small Business, we also observed that the establisher of the business is also a distinguishing factor between the two. The originator commonly referred to as founder or innovator is the master brain behind the business.
Founders of startups usually require the assistance of experts during the initiation stage and possibly continuously while the founder of a small business usually takes up a business that is peculiar in the family.
As we conclude our discourse on Building a Small Business vs. Building a Start-Up, it is safe to say that a startup vs small business is operated by entrepreneurs, however, the intent, primary function, and funding of their respective business models are eventually different.
We believe you have come to the understanding that there is a difference between startups and small businesses even though both words are used concurrently in the business world. In a nutshell, we can say that startups are different from small businesses mainly because they are created to grow fast.
We hope you had fun reading through this article and have learned something new in the process. Ensure you give us feedback.